Processing Fee..Capitalisation or revenue..URgent Sir!!!

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Rajesh (Querist)

27 August 2010 Dear Experts,
It is urgent sir...have posted this earlier but no response... I have a doubt in processing fee paid to a term loan of a wind mill.
1)Whether processing fee paid for term loan (the term loan is for wind mill which comes under Fixed Asset category) can be capitalised or revenueised?
2) If it has to be treated as revenue item is it because it does not come under qualifying asset?
3) If we cant capitalise as per AS-16, can we take AS-10 and as per AS-10 it has to be capitalised?
Pls. reply urgently required sir.
With regards,
Rajesh.

Aditya Maheshwari

Aditya Maheshwari (Expert)

27 August 2010 First of all i think the windmill is ready at the time of purchase. So it cannot be considered as a qualifying asset as per AS - 16 and hence corresponding borrowing cost cannot be capitalised in the cost of the windmill. So it has to be expensed out only. No option.

AS - 16 deals with borrowing cost and not AS - 10. So it cannot be capitalised as per AS - 10 also.

A qualifying asset as per AS - 16 is an asset that necessarily takes a substantial period of time to get ready for its intended use or sale.

So if the windmill takes sometime after which it can be put to use then capitalise the borrowing cost also.

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